House ownership/mortage problem

My father and his mate put together 35k punts 17.5k each in 2001 and borrowed 100k punt as a business loan as he was to old to get a mortgage (54) My dad's friend put his house up as collateral . They bought a house for 135000 punts with my dad and his friends name on the deeds.
My mum and dad moved into the house and began paying back the loan at 1000 approx euro now per month.

Move forward 8 years . My dad died 2 years ago. And with the recession my dads mates financial situation has changed for the worse and he is looking for his share of the house now.
there is roughly 60k euro left on the mortage and the house is valued at 250k

My questions (finally)

1. How much is my Dad's mate entitled to ?
2. how can i use the equity on the house to free up money ?

any help advise on this is greatly appreciated


Thank you

lucan said:

My father and his mate ... borrowed 100k punt as a business loan as he was to old to get a mortgage ... there is roughly 60k euro left on the mortage and the house is valued at 250k ...

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I assume you mean 60k outstanding on the 'business loan". As it wasn't a residential property mortgage, presumably there was no life insurance policy in place to pay off the outstanding loan on your father's death.

lucan said:

... 1. How much is my Dad's mate entitled to ?...

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As described above, half the value of the house, less half the outstanding loan and half of the ownership transfer costs (legal fees, land registry costs, conveyancing, etc.) with any stamp duty and CGT being his own responsibility (as it wasn't his PPR).

lucan said:

... 2. how can i use the equity on the house to free up money ? ...

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Apply for a mortgage on the property or sell it.

Thank you

mathepac said:

As described above, half the value of the house, less half the outstanding loan and half of the ownership transfer costs (legal fees, land registry costs, conveyancing, etc.) with any stamp duty and CGT being his own responsibility (as it wasn't his PPR).
.

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But - the OP said his parents paid all the loan repayments - so it's not that straightforward is it?
If the dad's mate had been paying back half of the loan repayments - then yes he would be entitled to half of everything. Was there any written agreement at all?
I would have said he is entitled to a return on his 35k investment which could be worked out by using the percentage increase in the house value . (You could even knock off the outstanding loan - but I will leave that out of it for now)

i.e House purchased 1for 35k Punts (171k Euro Approx) now worth 250k Euro i.e Price has increased 146%.
His original investment was 17.5k Punts or 22.4kEuro approx. If your mother is still paying off the loan in full then I would say the most he is entitled to 146% of his his original investment - i.e 32.7k Euro

This is all complicated again by the fact that current house values are pretty much guesswork - especially if the house is not actually being sold .
(If you wait a few more years it might be back to the original value!!)
But if he never paid towards the repayments - this is how I would calculate his entitlement. No way is he entitled to half the house value less the outstanding loan (that would be about 105k).
Hopefully some others here will agree with me before you pay him 105k?

mathepac said:

As described above, half the value of the house, less half the outstanding loan and half of the ownership transfer costs (legal fees, land registry costs, conveyancing, etc.) with any stamp duty and CGT being his own responsibility (as it wasn't his PPR).

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He put up half the deposit and the original security for the loan. The OP's parents made all the repayments on the loan.

The original equity was €45k + debt of €127k = €172k original purchase price
Current equity is €190k (45k original equity + 78k additional equity from property market gain + 67k from debt reduction) + debt of €60k = €250k current value

My reading is that the mate is now entitled to €61.5k (half the initial €45k + half the additional equity €78k). He is not entitled to a share in the €67k equity component attributable to debt reduction that he did not contribute towards.

The original loan is secured on the Dad's friend's home and his name is on the deeds of the Dad's house so 50/50 seems fair (unless there is an agreement to the contrary, which OP has not indicated there is).

There are other complicating / relevant issues not addressed by OP -

• did his father die intestate?
• if not did 50% (or some other share) of the house form part of his Dad's estate?
• how did the executor of the Dad's estate value the Dad's share of the house?
• who inherited the Dad's share? (due to the scheme of ownership it might not have passed directly to OP's Mum under the Family Home Protection Act)

There are two clear concepts here:

1. What you father's mate thinks he is entitled to by virtue of the original deal.
2. What you father's mte might be entitled to on a fair and objective basis

I won't presume to know what 1. might be, but it could be as much as 50% of the realised sales price (less costs). The key to finding 2. will be the following:

• Your father (and mother) bore the debt service cost and made capital repayments.
• Your father (and mother) received imputed rental income from the property.

It is the balance of those things that will be important.

A simple forumla would be to agree that the imputed rental value was equal to the interest payments made. Either party may object to that - noting that gross rental yields over recent yields have been a lot less than commercial interest rate. But in the absence of an actual rental figure it could be reasonable enough. If that was agreed you could simply net out realised price less original mortgage( 100k) divided by two and then subtract the capital repaid (40) as a calcualtion of the share to be paid out:

250 (say) - 100 - 40 = €110k to the mate.

Of course the mate might claim that the imputed rental was worth more.
You mother imght claim the impute rental was worth less.

That wil be the squabble point.


For a more complete analysis you would probably want specific values for:

Present value of imputed rents (received by father)
Present value of interest payments (paid by father)
Present value of risk premium (paid by mate in form of guarrantee securred on house)
Present value of capital repayments (paid by father 40k by definition)
Current price of house

And then net all those out on the basis of who paid what. I migh have missed some others.

Thanks for all the replies. They have been very helpfull . Just to update we have agreed a fig which is 70k .

As we have no capital and I'm already up to my neck in debt on another house . That's the next problem . |Trying to free up some money so any ideas are welcome ?

thanks